Practical advice
Critical thinking around the identification of assets and the
Conclusion
selection of valuation methodologies is important, as is documentation of the analysis and inputs.
Purchase price allocation is an exercise that utilises a range of bespoke methodologies which can be technically complex to apply and dependent on subjective inputs and assumptions. Given the challenges involved, and because the resulting figures provide direct indications of value within the financial statements, audit scrutiny should be expected. Critical thinking around the identification of assets and the selection of valuation methodologies is important, as is documentation of the analysis and inputs. Where key assumptions remain subjective, detailed analysis backed up by commercial reasoning and economic rationale may be required.
Valuation services
FRP has a dedicated Valuation Services team with years of experience in conducting PPA exercises for companies in the UK and internationally, across a wide range of sectors. We support finance teams with services ranging from independent advice to full-scope PPA exercises and support with follow- on matters such as audit review and impairment testing. We are always happy to speak to finance teams in need of support.
Jim Davies Financial Advisory
Notes
1 Financial Reporting Council, 2021. Business Reporting of Intangibles: Realistic proposals. Feedback Statement. [online] Available at: <https:// www.frc.org.uk/getattachment/Feedback-Statement-FINAL.pdf> [Accessed 10 March 2022]. 2 Icaew.com. 2020. Going concern and resilience: lessons learned from COVID-19. [online] Available at: <https://www.icaew.com/technical/ audit-and-assurance/faculty/going-concern-and-resilience-lessons- learned-from-covid19> [Accessed 10 March 2022]. 3 Gov.UK, 2021. Restoring trust in audit and corporate governance. Consultation on the government’s proposals. [online] Department for Business, Energy & Industrial Strategy. Available at: <https://www.gov. uk/government/consultations/restoring-trust-in-audit-and-corporate- governance-proposals-on-reforms> [Accessed 10 March 2022].
Jim Davies Partner Financial Advisory London +44 (0)7841 829 826 jim.davies@frpadvisory.com
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